Transcript Document 7210419

CHAPTER 9
IMPLEMENTING STRATEGY:
BUILDING RESOURCE
CAPABILITIES AND
STRUCTURING THE
ORGANIZATION
Screen graphics created by:
Jana F. Kuzmicki, PhD, Indiana University Southeast
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Chapter Outline

Strategy Implementation Framework


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Key Tasks
Leading the Implementation Process
Building a Capable Organization

Selecting People for Key Positions
Building Core Competencies and Competitive
Capabilities

Matching Organization Structure to Strategy
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Why Structure Follows Strategy
Strategic Advantages and Disadvantages of
Different Organization Structures
Organizational Structures of the Future
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The Task of Implementing Strategy
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An action-oriented, operations-driven activity
revolving around managing people and business
processes
Tougher and more time-consuming than crafting
strategy
Implementation
Success depends on doing a involves . . .
good job of
 Leading
 Motivating
 Working
with others to create fits between
strategy and how organization does things
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Why Implementing Strategy Is
a Tough Management Job

The demanding variety of managerial
activities that have to be performed
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Numerous ways to tackle each activity
 People management skills required

Perseverance to launch a variety of initiatives
 Number of bedeviling issues to be worked out

Battling resistance to change
 Difficulties of integrating efforts of work
groups into a smoothly-functioning whole
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Why Implementing Strategy Is
a Tough Management Job
 Implementing
a new strategy takes adept
leadership to
 Overcome
 Build
pockets of doubt
consensus
 Secure
commitment of concerned
parties
 Get
all implementation pieces in place
and coordinated
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The Eight Components of
Implementing Strategy

Allocating Resources
supportive “fits”
Building a
Capable
Organization
Exercising
Strategic
Leadership
Shaping Corporate
Culture to Fit
Strategy
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Establishing StrategySupportive Policies
Strategy
Implementer’s
Action
Agenda
Tying Rewards
to Achievement
of Key Strategic Targets
Instituting Best
Practices for
Continuous
Improvement
Installing Support
Systems to Carry
out Strategic Roles
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Ways to Lead
Implementation Process
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Take active, visible role or low-key, behind the
scenes role
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Make decisions authoritatively
or based on consensus
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Delegate much or little
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Be personally involved in details or
coach others to carry day-to-day burden

Proceed swiftly to achieve results or move
deliberately, content with gradual progress
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Factors Influencing Managers in
Leading Implementation Process

Experience and knowledge of business

New to job or seasoned
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Network of personal relationships

Diagnostic, administrative, interpersonal,
and problem-solving skills

Authority given manager

Leadership style most comfortable with

View of role to get things done

Context of organization’s situation
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Task # 1: Building a
Capable Organization
Select able people
for key positions
Develop skills, core competencies,
managerial talents, competitive capabilities
Organize business processes, value chain
activities, and decision-making to promote
successful strategy execution
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Building Core Competencies: The
Necessary Understanding
1. Core competencies are rarely grounded in skills
or know-how of a single department
 Typically emerge from
collaborative efforts of
different work groups
2. Leveraging competencies into competitive
advantage requires concentrating more effort
and more talent than rivals on strengthening
competencies and creating valuable
organizational capabilities
4. Sustaining competitive advantage requires
adapting competencies to new conditions
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Building Competitively Valuable
Competencies and Capabilities
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Involves
 Managing human skills, knowledge bases,
and intellect
 Coordinating efforts of related work groups
 Collaborative networking among internal
groups and with external partners
 Achieving dominating depth
Senior managers have to guide the process
The Ongoing Challenge: Broaden, deepen, or
modify competencies and capabilities in
response to customer/market changes
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Building Competencies and
Capabilities: The Keys to Success:
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Superior selection
Training
Cultural influences
Cooperative
networking
Motivation
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Empowerment
Attractive incentives
Organizational flexibility
Short deadlines
Good databases
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The Process of Building
Organizational Capabilities: Step 1
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Step one is to
 Select people with relevant skills/experience
 Broaden or deepen individual abilities as
needed
 Mold the energies and
work products of
individuals into a
cooperative group effort
to create organizational ability
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The Process of Building
Organizational Capabilities: Step 2
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As experience builds, such that the
organization learns to accomplish
the activity consistently well and at
acceptable cost, the “ability”
translates into a competence and
an organizational capability
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Capabilities emerge from establishing and
nurturing collaborative working relationships
between individuals and groups in departments
and between a company and its external allies
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The Process of Building
Organizational Capabilities: Step 3
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If mastery is achieved to the point where
the organization has the capability to
perform the activity better than rivals,
the “capability” becomes a
distinctive competence
and holds potential for
competitive advantage
This is the optimal outcome
of the capability-building
process!!
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Strategy and Organization Structure
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Few hard and fast rules for organizing
 Main rule: Structure must support and
facilitate good strategy execution
Each firm’s organization structure is
idiosyncratic, reflecting
 Prior arrangements, internal politics
 Executive judgments and preferences about
how to arrange reporting relationships
CEO
Vice President
Vice President
Vice President
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Matching Organization Structure to
Strategy: The Steps to Take
1.
2.
3.
4.
Pinpoint critical activities and capabilities
Decide which activities to outsource
Decide which activities require “partners”
Make primary, internally-performed activities
the main building blocks
5. Determine degree of authority to delegate
6. Establish ways to achieve coordination
7. Assign responsibility for managing
relationships with outsiders
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Advantages of Decentralized
Decision-Making and Empowerment
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Fewer management layers
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Less bureaucracy
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Shorter response times
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More creativity and
new ideas
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Better motivation of employees
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Greater employee involvement
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Increased organizational capability
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The Global Trend Toward
Decentralization and Empowerment
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Three beliefs are driving company preferences
for flatter, more decentralized structures:
1. Traditional hierarchical structures based on
functional specialization don’t work well
where there’s a big need for cross-functional
competitive capabilities
2. Decisions are best made at the lowest
organizational level capable of making
competent, timely, informed decisions
3. Empowering employees to exercise judgment
on job-related matters improves motivation
and job performance
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Uniting Efforts of Interrelated
Organizational Units: The Options
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Coordinating teams
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Cross-functional task forces
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Dual reporting relationships
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Informal networking
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Incentive compensation tied to group
performance
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Teamwork and interdepartmental
cooperation
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Why Structure Follows Strategy
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Changes in strategy typically require a new
structure for implementation to be successful
Research indicates
 Structure
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affects performance
 Structure merits reassessment whenever
strategy changes
 New strategy involves different skills and key
activities
How work is structured is a means to an end -not an end in itself!
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Strategy-Driven Approaches
to Organization Structure
Functional and process specialization
Geographic organization
Decentralized business units
Strategic business units
Matrix structures
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A Traditional Functional
Organizational Structure
General Manager
Research &
Development
Human
Resources
Manufacturing
Engineering
Marketing
Finance &
Accounting
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A Process-Oriented Functional
Structure
General Manager
Foundry &
Castings
Screw
Machining
Milling &
Grinding
Inspection
Finishing &
Heat Treating
Customer
Service
Loading &
Shipping
Billing &
Accounting
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A Geographic
Organizational Structure
CEO
Corporate
Staff
GM
GM
GM
GM
GM
North America
Latin America
Europe
Asia Pacific
Central Asia &
Africa
District
Staff
Engineering &
Prod. Design
Production
Marketing &
Distribution
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A Decentralized Line-of-Business
Organization Structure
CEO
Corporate
Services
GM
Business A
GM
Business B
GM
Business C
Functional/Process
Departments
Functional/Process
Departments
Functional/Process
Departments
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An SBU Organization Structure
CEO
Corporate
Services
Group VP
SBU I
Group VP
SBU II
Group VP
SBU III
Strategically Related
Business Units
Strategically Related
Business Units
Strategically Related
Business Units
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A Matrix Organization Structure
General Manager
Head
R&D
Head
Manufacture
Head
Marketing
Head
Finance
Venture
Manager 1
R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Venture
Manager 2
R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Venture
Manager 3
R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Venture
Manager 4
R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
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Options for Supplementing the Basic
Organization Structure
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Cross-functional task forces
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Self-contained work teams
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Special project teams
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Venture team approach
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Process teams
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Contact managers
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Relationship managers
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Perspectives on Organizing
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All the basic organization structures have
strategic advantages and disadvantages
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There is no ideal organization design
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To do a good job of matching
structure to strategy
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Pick a basic design
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Modify as needed
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Supplement with coordinating mechanisms
and communication arrangements
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When Do Traditional Hierarchical
Structures Make Strategic Sense?
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When activities can be divided into
simple, repeatable tasks and
efficiently performed
in mass quantity
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There are important
benefits to deep
functional expertise
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Customer needs are
standardized
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Organizational Structures of the
Future: Success Depends On . . .
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Quick response to shifting customer The future
structure will
preferences
be . . .
Short design-to-market cycles
First-time quality
Custom order and multi-version production
Expedited delivery and accurate order filling
Personalized customer service
Rapid assimilation of new technologies
Creativity and innovativeness
Speedy reaction to competitive developments
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Organizational Structures of the
Future: Meeting the New Requirements
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Decentralized structures with fewer managers
Small-scale business units
Reengineering to decrease fragmentation
Development of stronger and newer capabilities
Collaborative partnerships with outsiders
Empowerment and self-directed work teams
Lean staffing of corporate support functions
Open communications via e-mail
Electronic information systems
Accountability for results
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Characteristics of
Organizations of the Future
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Fewer boundaries between
 Different vertical ranks
 Functions and disciplines
Change &
Learning
 Units
in different geographic locations
 Firm and its suppliers, distributors, strategic
allies, and customers
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Capacity for change and learning
Collaborative efforts among people in different
functions and geographic locations
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Extensive use of digital technology
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